Facebook and banks behind flotation face lawsuit
- 23 May 2012
- From the section Business
Facebook, its founder Mark Zuckerberg and the banks leading its flotation are being sued by disgruntled shareholders.
A writ, filed in a Manhattan court, alleges that Facebook's revised growth figures were not disclosed to all investors.
US financial regulators have already said Morgan Stanley may have questions to answer over the disclosure of information ahead of Friday's float.
The lead underwriter to Facebook said it had fully complied with the rules.
The lawsuit claims that defendants concealed from investors during the flotation marketing process "a severe and pronounced reduction" in revenue growth forecasts.
Meanwhile, the Reuters and AP news agencies reported that the Senate banking committee may look into the matter, but was still considering its options.
These latest developments continue to cast a cloud over one of the most anticipated stock market listings of recent times.
The flotation was disrupted on Friday by technical glitches on the Nasdaq stock exchange. The share price has since slumped amid worries that the company was over-valued by advisers marketing the float.
On Tuesday, the leading financial regulator in Massachusetts issued a subpoena to Morgan Stanley as part of an investigation into whether its analysts selectively disclosed revised revenue forecasts for Facebook.
Now, a group of investors has issued a class-action lawsuit alleging that Facebook revenues were revised down because of a surge in the number of people using mobile devices for apps and connection to websites.
Morgan Stanley has not yet commented on the latest lawsuit.
On Tuesday, in response to the Massachusetts subpoena, the company said it was "in compliance with all applicable regulations" and had "followed the same procedures for the Facebook offering that it follows for all initial public offerings".
Meanwhile, there was some good news for the Facebook share price, which closed up 3.2% at $32-a-share.
The shares listed at $38-a-share, and fell as low as $31 on Tuesday.